Import-dependent businesses and manufacturers are grappling with a significant 23% surge in Customs import duties due to the recent depreciation of the Nigerian naira against the United States dollar. This increase in costs comes after a period of relative stability observed in April.
As of May 8, the cost of clearing imports soared to N1,412.573 per dollar, representing a sharp rise from the year-to-date low of N1,150.16 per dollar recorded on April 23. This surge in import duty costs signifies a 48% escalation compared to the rate of N951.941 per dollar used at the beginning of the year, highlighting the increased financial burden on businesses engaged in international trade.
Jonathan Nicole, former president of the Shippers Association of Lagos State, expressed concerns over the destabilizing impact of fluctuating import duty rates on importers’ investments. Nicole emphasized the need for policy consistency, citing established practices in advanced economies where import duty calculations adhere to standard procedures without frequent adjustments.
“The inconsistency in rates is causing importers to face challenges and consider relocating to countries with more predictable import policies,” Nicole remarked in a statement to BusinessDay.
The implementation of the 2023 Customs Act has empowered the Central Bank of Nigeria (CBN) to determine exchange rates used in computing import duties. This legal provision has resulted in a volatile environment for import duty calculations, directly influenced by fluctuations in the naira-dollar exchange rate.
Ijeoma Ezeasor, secretary general of the National Shippers Association of Nigeria, highlighted the detrimental impact of currency fluctuations on manufacturers, particularly those dealing with orders placed during the disruptions of the COVID-19 pandemic. She stressed the urgent need for clarity and accountability in fiscal administration to mitigate adverse effects on business planning and operational costs.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), emphasized the importance of aligning import duty rate determinations with broader fiscal policy objectives to ensure stability and support business resilience. Yusuf advocated for policy revisions, including quarterly hedging of exchange rates, to safeguard businesses from sudden financial shocks.
In response to these challenges, Obiora Madu, director general of the African Centre for Supply Chain, emphasized the necessity of collaborative efforts between fiscal and monetary authorities to foster a conducive trade environment that supports economic growth and job creation.
The evolving dynamics of import duty calculations underscore the critical need for policy coherence and proactive measures to shield businesses from the adverse effects of exchange rate volatility.
